By Mike Dolan
May 12 (Reuters) –
What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
With the month-old Iran war ceasefire now on “life support”, according to U.S. President Donald Trump, stock markets are finding it harder to see past the renewed tensions between the two sides.
As ever, oil prices have taken the possible resumption of military action badly, with Brent crude rising back to around $107 per barrel – some $10 higher than the lows of last week – and year-end futures climbing back above $90/bbl.
I’ll get into that and more below.
But first, check out my latest column on why world finance is worried about Kevin Warsh’s plans for the Fed.
And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.
CEASEFIRE ON LIFE SUPPORT
While Wall Street hit new record highs yesterday, there’s been a notable step back in global equities today. Even the high-flying, tech-heavy KOSPI index in South Korea recoiled, albeit partly due to domestic jitters about windfall taxes on AI-related profits.
The energy picture has created an anxious backdrop for the release later today of the April U.S. consumer price report, where forecasts already point to an acceleration in the headline rate of inflation to near-three-year highs of 3.7%.
That makes for uneasy reading heading into big auctions of 10- and 30-year Treasury debt today and later in the week.
The bond market mood was rattled further by the latest twist in the UK political drama.
Even though Prime Minister Keir Starmer insisted again today that he would stay on as premier despite his party’s poor showing in UK local elections last week, key members of his cabinet have reportedly urged him to set out a timetable for his departure.
The uncertainty about what happens next and what a new PM might mean for the direction of UK fiscal and economic policy saw long-dated British gilt yields surge back to their highest level since 1998, with sterling also slipping.
Elsewhere, the dollar was generally firmer and the yen slipped even as U.S. Treasury Secretary Scott Bessent, who’s visiting Tokyo, seemed to endorse the Bank of Japan’s efforts to normalize monetary policy and stabilise the currency.
On the yen, Bessent said that “excess volatility is undesirable, and we have been in close contact with the Ministry of Finance, and we will stay in close contact with them.”
Meantime, Federal Reserve Chair-apparent Kevin Warsh cleared a key procedural hurdle in the U.S. Senate on Monday, moving him closer to confirmation and a smooth handoff from outgoing Chair Jerome Powell, whose term ends on Friday.
Chart of the day
U.S. consumer prices likely raced higher for a second straight month in April, which would result in the largest annual increase in inflation in more than 2-1/2 years and bolster expectations that Federal Reserve interest rates will remain on hold this year.
In the 12 months through April, the CPI is projected to have advanced 3.7% – the biggest year-on-year increase since September 2023 following a 3.3% rise in March. Aggravated by the Iran-related oil shock, gasoline prices likely accounted for most of the increase in the CPI last month after a record surge in March.
Today’s events to watch
• U.S. April CPI (8:30 a.m. EDT)
• U.S. 10-year note auction (1 p.m. EDT)
• New York Fed’s John Williams and Chicago Fed’s Austan Goolsbee speak
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(By Mike Dolan)
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